ARM Cement appears to have abandoned its recent plan to raise up to $105 million (Sh10.7 billion) through a five-year private bond.
ARM’s fundraising has been spurred by its expensive short-term debts that have partly contributed to its losses.
The company had in August announced plans to issue a Sh7 billion bond before raising the amount to Sh10.7 billion last month.
ARM Cement is seeking to raise $125 million (Sh12.7 billion) from a strategic investor who is expected to take a controlling stake in the company once it converts the preference shares it is allotted in the Nairobi Securities Exchange-listed firm.
The move indicates that the cement manufacturer has abandoned its recent plan to raise up to $105 million (Sh10.7 billion) through a five-year private bond.
“ARM Cement is currently in discussion with an international institutional investor who intends to make an investment of up to $125 million equity investment, through convertible preference shares,” the company said yesterday in a statement.
The firm said it will later release further details on the proposed transaction which is expected to be completed by March.
ARM’s chief executive Pradeep Paunrana said the move is meant to strengthen the company’s balance sheet by reducing debt, but declined to comment further.
Preference shares, also known as preferred stock, usually have a higher priority claim on the company’s assets and earnings than ordinary shares.
Their contract generally requires that they are paid a fixed rate of dividend –amounting to a form of interest— first before any dividends are paid on ordinary shares. Prior to their conversion, preferred stocks typically don’t have voting rights.
The Sh12.7 billion could potentially give the strategic investor a 40 per cent stake in ARM –making it the single-largest investor— based on the company’s current market capitalisation of Sh19.5 billion.
ARM’s fundraising has been spurred by its expensive short-term debts that have partly contributed to its losses. The company had in August announced plans to issue a Sh7 billion bond before raising the amount to Sh10.7 billion last month.
The latest change in the funds sought and the instrument to be used is seen reflecting new developments since then.
ARM’s short term debts jumped 35 per cent to Sh14.4 billion in the nine months ended September, raising its finance costs 3.3 times to Sh1.1 billion.
This contributed to its net loss of Sh469 million in the same period, reversing the net profit of Sh1.1 billion the year before.
ARM also saw its unrealised foreign exchange losses increase 15.5 times to Sh2 billion, with sales rising at slower rate of seven per cent to Sh11.7 billion. Its share price has dropped 54 per cent since January to the current range of Sh39.5 apiece.
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